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Picture: 123RF/POP NUKOONRAT
Picture: 123RF/POP NUKOONRAT

Financial control is a critical business function. With corporate fraud increasing and difficulties introduced by remote working, it becomes even more important. “Financial control is a mechanism businesses can use to detect and prevent fraud,” says John Molanda, head of product innovation at Absa Transactional Banking’s cash management team.

Molanda says more than 60% of SA businesses have been victims of fraud over the past two years, according to the PwC 2020 Global Economic Crime and Fraud Survey. “In most cases, fraud is committed by internal staff,” he says.

After fraud has been detected, companies need to investigate to identify and apprehend the criminal, litigate and try to recover stolen funds. But Molanda says this can cost as much as 10 times the amount of the original fraud, which for some businesses is prohibitive. Prevention is a better option.

Integrate and prevent fraud

One of the best ways to prevent fraud is to improve financial controls by integrating business accounting and banking systems. This can eliminate the weaknesses in traditional banking processes and remove opportunities for fraud.

Richard Stocken, head of cash management product at Absa Transactional Banking, says that as banks invest heavily in providing secure banking systems, the weakness remains at the point when payments are introduced to the banking system. Here, there are opportunities to manipulate supplier bank details so that money is paid into a fraudster’s account.

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Stocken says while companies often respond to the risk of fraud by adding more controls, integrating the business’s banking system into their accounting system is a better option.

He gives the example of account verification, which is a quick way to make sure the bank account on an invoice belongs to the issuer of the invoice.

“We find this service is not used often because it sits outside the company’s system in the banking system,” Stocken says. This means staff have to log into the banking system to perform the account verification, and it’s difficult for a finance director to ensure that this is done for all account changes.

“Our advice would be to integrate the verification service directly into your accounting system so that at the time you are changing supplier details, incorrect banking details are automatically identified and fraudulent payments prevented.”

Molanda says business can also mitigate the risk of fraud by integrating payment functionality.

“There is a transition period between staff downloading payment files from their accounting system and uploading them into the banking system. Banking details can be changed in this transition period. If you integrate this functionality you remove the window of opportunity for fraud.”

Integration does more than prevent fraud

“Integrating and automating processes not only reduces vulnerabilities to fraud, it dramatically increases efficiency within a finance department,” Stocken says.

Absa’s cash management team recently worked with a client where the number of employee hours used to make about 1,000 payments each month was reduced from 180 to 30.

“We integrated their banking directly into their accounting system, reducing the number of hours needed and freeing up four of the five employees previously used in the payments process to focus on higher value-adding activities in the business.”

Importantly, Molanda says integration is not just for big businesses.

“Integration used to be difficult and costly, something only large companies with large IT departments could do. Through the evolution of technology such as APIs, the process has become a lot simpler and cheaper. We have invested significantly in API technology and can now offer our clients many integration opportunities.”

Absa has also partnered with different accounting systems and enterprise resource planning systems such as epic ERP and AJS to do the work of integrating so that we are able to offer the benefit to our clients without them investing as much time and capital as would previously have been necessary.”

This article was paid for by Absa CIB.

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